Cummins India remains bullish on India market, expects improvement ahead

Engines and power equipment maker Cummins India has said it remains bullish about the India market and expects a further improvement in demand going forward, even as the peak festive season demand may see a 50 per cent year-on-year decline.

The company also said it expects to get back to the optimum capacity utilisation across its plants, which is on average 80-85 per cent, by the middle of 2021.

Cummins India reported a 65 per cent decline in consolidated profit after tax (PAT) at Rs 53.02 crore in the April-June quarter of the current fiscal, impacted by the coronavirus pandemic, as compared to a PAT of Rs 152.56 crore in the same period of FY20.

“The demand will be better than previous months, because we hit the bottom and we are just reviving somewhere. So while if you compare the festive season this year with our peak festive season, we may be down by 50 per cent. But if you compare with previous (June) quarter, it will be up by 15-20 per cent,” Cummins IndiaManaging Director Ashwath Ram told PTI.

“So we are optimistic that it will be better than the lows we have seen in the last six months,” he said.

Ram said that revival is taking place from a 70-80 per cent decline in demand from the peak level during the lockdown period (CV demand was down by that much during the lockdown), adding, “It will be be a long cycle to revive, probably till 2022 before this market fully recovers.”

At present, Cummins is working at around 70 per cent capacity of the pre-COVID level across plants.

He saidthe company may reach the average capacity utilisation of 80-85 per cent by the middle of next year.

The company was also impacted like all others in the industry because of the nearlytwo months of completelockdown, but it was ale to come back pretty strongly, he said, adding, “overall, we are quite bullish and optimistic that thingsare continuing to get better,” Ram said.

Various cost-saving measures in the areas of variable and fixed costs, including a 10-15 per cent reduction in the professional workforce, taken both in pre- and post-lockdown period helped the company in managing the business in times of the pandemic.

“In doing all of that, we find that we have changed our cost structure to a manner that even if the demand will take more time to come back, we will continue to grow successfully,” Ram said.

He said that Cummins will continue to invest in Indian market, provided that there is an opportunity for it, besides adding new products as per demand.

He termed as quite “positive” government’s recent move on electric vehicle and said since lithium-ion batteries can’t be imported from China in view of the conflict and the industry will have to look at alternate resources and technology, it will drive government faster towards the fuel cell and hydrogen space which is the leading technology which Europe and America are working towards.

“In this Cummins has a lot of available technology already. So from Cummins perspective, I am feeling optimistic,” Ram said.

He, however, said that there should not be any knee-jerk action and industry should be given time on this issue.

There should be a clear policy in place to attract those industries and gradually set up investments in those industries, he added.

According to Ram, the government has so far taken measures only on the supply side such as boosting liquidity but industry needs steps such as announcement of the much-awaited scrappage policy, reduction in GSTto revive demand.

The government needs to aggressively boost spending in construction and infra, he added.